Housing affordability goes down sharply in Canada
The recent report by RBC Economics shows that Canada faced the largest decrease in housing affordability in about 30 years.
RBC’s aggregate affordability measure rose by 2.7 points to 45.3% during the second quarter, marking the fourth quarterly gain in a row and offsetting the improvement we’ve seen at the beginning of the pandemic.
According to RBC, it was the biggest quarterly gain in more than 30 years.
“Although Canada’s real estate market isn’t as hot as it was at the start of 2021, it keeps functioning at historically strong levels,” – RBC noted. “Strong demand and extremely tight demand-supply imbalance pushed prices even higher in Q2, supporting a generalized deterioration in affordability.”
RBC’s report says the affordability worsened on a national level, with the largest measures gains (affordability deteriorations) seen in Toronto (up by 4.1%), Vancouver (up by 3.2%), and Ottawa (up by 3.1%).
The strongest hits at affordability were reported in the sector of single-detached houses. The share of household income necessary to cover the cost of owning a single-detached property in Canada rose by 3 points and reached 49.7% in the second quarter, which is much higher than the long-term average of 43.1%.
RBC expects the tendency to continue in the nearest future, supported by a supply-and-demand imbalance.
“It will keep increasing ownership costs in all markets and housing categories,” – RCB said. “At the same time, the affordability deterioration will moderate, as the pace of price growth is now slowing in many areas, and we expect home prices to flatten next year”.